MetLife 2013 Annual Report Download - page 139

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
8. Investments (continued)
(1) Included within fixed maturity securities, short-term investments, equity securities and cash and cash equivalents.
(2) Included within payables for collateral under securities loaned and other transactions.
(3) Security collateral on deposit from counterparties may not be sold or repledged, unless the counterparty is in default, and is not reflected in the
consolidated financial statements.
Invested Assets on Deposit, Held in Trust and Pledged as Collateral
Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value for cash and cash equivalents, short-
term investments, fixed maturity and equity securities, and FVO and trading securities, and at carrying value for mortgage loans at:
December 31,
2013 2012
(In millions)
Invested assets on deposit (regulatory deposits) ............................................................... $ 2,153 $ 2,362
Invested assets held in trust (collateral financing arrangements and reinsurance agreements) ............................. 11,004 12,434
Invested assets pledged as collateral (1) ..................................................................... 23,770 23,251
Total invested assets on deposit, held in trust and pledged as collateral ........................................... $36,927 $38,047
(1) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Notes 4
and 12), collateral financing arrangements (see Note 13) and derivative transactions (see Note 9).
In the second quarter of 2013, MetLife, Inc. announced its plans to merge three U.S. based life insurance companies and an offshore reinsurance
subsidiary to create one larger U.S. based and U.S. regulated life insurance company (the “Mergers”). The companies to be merged are MICC, MetLife
Investors USA Insurance Company (“MLI-USA”) and MetLife Investors Insurance Company (“MLIIC”), each a U.S. insurance company that issues
variable annuity products in addition to other products, and Exeter Reassurance Company, Ltd. (“Exeter”), a reinsurance company that mainly reinsures
guarantees associated with variable annuity products. MICC, which is expected to be renamed and domiciled in Delaware, will be the surviving entity. In
October 2013, Exeter, formerly a Cayman Islands company, was re-domesticated to Delaware. Effective January 1, 2014, following receipt of New York
State Department of Financial Services (the “Department of Financial Services”) approval, MICC withdrew its license to issue insurance policies and
annuity contracts in New York. Also effective January 1, 2014, MICC reinsured with an affiliate all existing New York insurance policies and annuity
contracts that include a separate account feature; on December 31, 2013, MICC deposited investments with an estimated fair market value of $6.3
billion into a custodial account, which became restricted on January 1, 2014, to secure MICC’s remaining New York policyholder liabilities not covered
by the reinsurance. The Mergers are expected to occur in the fourth quarter of 2014, subject to regulatory approvals. See Note 12 for information
regarding the impact of the re-domestication of Exeter on availability under our credit facilities.
See “— Securities Lending” for securities on loan and Note 7 for investments designated to the closed block.
Purchased Credit Impaired Investments
Investments acquired with evidence of credit quality deterioration since origination and for which it is probable at the acquisition date that the
Company will be unable to collect all contractually required payments are classified as purchased credit impaired (“PCI”) investments. For each
investment, the excess of the cash flows expected to be collected as of the acquisition date over its acquisition date fair value is referred to as the
accretable yield and is recognized as net investment income on an effective yield basis. If subsequently, based on current information and events, it is
probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash
flows previously expected to be collected, the accretable yield is adjusted prospectively. The excess of the contractually required payments (including
interest) as of the acquisition date over the cash flows expected to be collected as of the acquisition date is referred to as the nonaccretable difference,
and this amount is not expected to be realized as net investment income. Decreases in cash flows expected to be collected can result in OTTI or the
recognition of mortgage loan valuation allowances.
The Company’s PCI investments, by invested asset class, were as follows at:
December 31,
2013 2012 2013 2012
Fixed Maturity Securities Mortgage Loans
(In millions)
Outstanding principal and interest balance (1) ................................................ $5,319 $4,905 $291 $440
Carrying value (2) ...................................................................... $4,109 $3,900 $138 $199
(1) Represents the contractually required payments, which is the sum of contractual principal, whether or not currently due, and accrued interest.
(2) Estimated fair value plus accrued interest for fixed maturity securities and amortized cost, plus accrued interest, less any valuation allowances, for
mortgage loans.
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